Electric and Duke Energy and Energy & Environment

Critics: Duke trying to shift more Indiana plant cost

August 2, 2013

A consumer group maintains Duke Energy is trying skirt an agreement that caps how much of cost overruns electric customers must pay on its new $3.5 billion coal-gasification plant in southwestern Indiana.

That claim follows Duke confirming the Edwardsport plant was shut down for repairs starting six days after the company declared it operational in early June, The Indianapolis Star reported. Duke officials attributed the shutdown to damaged fans that help vaporize wastewater at the plant, which converts coal to synthetic natural gas and burns it to generate electricity. Without the fans, Duke can't operate the two gasifiers.

One returned to operation on July 9, and the plant has been generating power intermittently since then, Duke spokeswoman Angeline Protogere said Thursday.

"That's not unusual with any new plant, but it is more common with advanced technology on this scale," she said. "We expect to deal with technical issues early in operations."

The plant's opponents say the problems indicate Duke prematurely declared the project "in-service," which would allow Duke to recover repair costs from its customers despite a settlement the company reached with the Indiana Utility Regulatory Commission in December. That agreement capped the amount Duke could collect from ratepayers for construction at about $2.6 billion, with Duke having to cover about $900 million itself.

The plant's original 2007 cost estimate was $1.9 billion.

"This has nothing to do with whether the plant is operational and everything to do with Duke Energy bilking ratepayers for costs they should not be able to recover," said Kerwin Olson, executive director of the Indianapolis-based Citizens Action Coalition.

Protogere said Duke disputes any accusation that it is trying to take advantage of a loophole in the settlement.

"It all depends on the repair," she said. "Some of it would be considered construction under the hard cap. Others would be considered operation and maintenance costs."

Consumer groups argue that the Edwardsport project was misguided — pointing to a $631 million natural gas-powered plant proposed by Indianapolis Power & Light Co. that would have produced more electricity.

"There are no protections in place for ratepayers from a white elephant," Olson said. "At what point does the commission finally do their job and cut off the tap?"

Danielle McGrath, a state utility commission spokeswoman, said the agency could not comment because the Duke proceedings are ongoing.

Duke provides electricity to about 790,000 homes and businesses in Indiana. The company has said ratepayers can expect a 14 percent to 16 percent increase in their monthly bills for construction of the Edwardsport plant. Nine percentage points of that increase has already occurred, with the rest to be phased in through 2015.

Protogere said Duke expects electricity production to ramp up to full capacity over the next 15 months. She declined to say how much electricity the plant about 40 miles south of Terre Haute has been putting on the grid. Doing so could impact the energy trading market, she said.

"We don't confirm whether a unit is online," she said. "We aren't in the habit of telling people that information."

According to a monthly compliance report filed with state regulators, the plant ran at less than 10-percent capacity in June.

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